Close menu

How to Calculate the ROI of Customer Service Knowledge Management

Madeline Jacobson
6 mins
happy customer service team using knowledge base and demonstrating ROI of customer service knowledge engagement

Are you looking to start using a knowledge management platform? Or, maybe you’ve already got one, but you want to ensure your senior leadership gives you the green light to keep it in the budget.

Well, persuading your organization’s leadership team to invest in a knowledge management or engagement tool is only half the battle. Once you’ve integrated your new tech and begun developing processes to maximize success, the next step is convincing top decision-makers it’s valuable enough to keep.

And as a customer experience leader, it’s often your responsibility to document the ROI of knowledge management in customer service. But calculating your platform’s return on investment (ROI) and making the case to the C-suite is a task that’s easier said than done.

To complicate matters, measuring customer service ROI is rarely black and white. To justify the cost of any software, it’s essential you first align your metrics with broader organizational goals. By proving your knowledge management software is helping the company meet critical objectives, it will be much easier to secure the budget to pay for it year after year.

So, how exactly do you calculate the ROI of knowledge management in customer service? Below, we break it down into a few simple calculations you can use to keep senior leadership invested in your knowledge management platform and optimize your ROI over time.

The Basic Formula: ROI of Knowledge Management

In a recent survey by HubSpot, 40% of survey respondents admitted their companies thought of customer service as an expense rather than a growth opportunity. If you want to ensure your company continues to invest in customer service, you need understand the ROI to show your leadership that investing in customer support is a lucrative strategy.

Before we dive into the specific calculations that make up the ROI of knowledge management in customer service, it’s essential to look at the basic formula.

Investopedia defines the calculation of the return on investment (ROI) as “dividing the profit earned on an investment by the cost of that investment.”

When you apply this to knowledge management in customer service, the formula looks like this:

ROI =  (monthly knowledge management savings- monthly maintenance cost)/
  monthly maintenance cost

Here’s what it looks like if your monthly savings tied to knowledge management was $42,000, and your monthly maintenance cost for your knowledge management platform was $1,500.

ROI= ($42,000 – $1,500)/$1,500
  

     ROI=  $40,500/$1,500=$27

In this example, your return on investment is $27. This means for every $1 your senior leadership invests into your knowledge management system, they get a return of $27. That’s a 2700% return on investment!

Your senior leadership wouldn’t need time to consider keeping your knowledge management (KM) platform in the budget if you can share a simplified ROI breakdown for them.

However, there’s a lot more that goes into the ROI of knowledge management in customer service. 

The ROI of Knowledge Management in Customer Service

In 2022, the global customer experience management market is valued at over $11 billion. So, why do business owners spend so much on customer service? Because they know it directly impacts their bottom line.

Within knowledge management, you should track a few key performance indicators (KPIs) when it comes to customer service. You can better understand your overall ROI and improve customer support by tracking and understanding these metrics.

Let’s look at some crucial KPIs you should track, broken down into customer and customer support team KPIs. Just remember, each of these KPIs indirectly impacts your ROI. Calculating these will help you accurately estimate the ROI of your knowledge management in customer service.

For Customers

  • Average handle time: AHT is the average duration your customer support team takes to help solve a customer’s inquiry. The quicker your agents can find information, the faster they can solve the customer’s problem.
  • First contact resolution: This is the number of customer inquiries solved within the first contact with a customer. Rather than agents regularly transferring calls when they don’t know an answer, they can search for answers in your knowledge management platform and improve your company’s FCR.
  • Average hold time: This is the average amount of time customers spend on hold over a phone conversation with customer support. The faster agents can find the information they need to assist customers, the less time customers will have to wait on hold.
  • After-call work time: This is the time it takes for customer agents to complete after-call tasks like writing any notes about the interaction, scheduling follow-up actions, or updating the knowledge base.

For Customer Support Teams

  • Time savings: Customer support teams are at the frontline of every company. When you can reduce their time on customer inquiries, you save the company time and enable your agents to assist more customers. You should be tracking the total time spent on each query. Reduced time per user leads to reduced labor and increased ROI.
  • Ticket or Call Deflection: In addition to an internal knowledge base for your customer service team, you can offer a robust external knowledge base for your customers. With greater self-service, more customers will be able to find the answers they need directly on your website. This will naturally result in fewer calls to your contact center, giving agents more time to focus on resolving complex issues and optimizing the customer service experience.
  • Overall NPS and CSAT scores: Your NPS—or net promoter score—is a simple tally of your customer feedback responses. Just subtract the percentage of detractors from the percentage of promoters, and you have your NPS. Another similar scoring method is CSAT—or customer satisfaction score. To calculate this, take the number of happy customers (4 or 5 out of 5 ratings) and divide them by the total number of responses.

Measure the Reduction in Time Spent Searching for Information

Nearly 60% of consumers won’t wait on hold for more than a minute, and more than 32% aren’t willing to wait on hold at all, according to data from Velaro.

While these numbers may seem high, it’s not all that shocking when you consider your own experiences. Like you, your customers are busy with dozens of distractions vying for their attention every moment. 

Sitting on hold, especially for more than a minute, could significantly impact their perception of your organization and your team’s competency. If a provider’s customer service reps can’t give you the answers you need quickly, are you sure you can trust them with your data and needs?

That’s the same question your customers ask themselves every time they sit on hold while your team struggles to find information.

But a knowledge management platform that makes all content searchable will allow service reps to quickly locate answers to customers’ questions and concerns—often without needing hold time. This fosters better customer experiences, which, over time, can lead to better retention, greater value per customer, and more significant ROI.

The best way to measure a reduction in search time for customer service reps is to calculate your department’s average hold time and average time to resolution before implementing a knowledge management platform. Once your reps have gotten ramped up on the platform, you can measure your department’s average hold time and average time to resolution again. If you can show a reduction in the average time it takes your reps to assist customers, that will help you make a strong case to your C-suite that your knowledge engagement software is yielding a return on investment.

Monitor Decreases in Onboarding Time for New Hires

Your organization’s onboarding process is critical to employee success and the success of your organization overall. Yet effective onboarding is rare. Only 12% of employees “strongly agree” that their employer does a great job onboarding new hires, according to data from Gallup.

Furthermore, approximately one-third of new hires look for a new job within the first six months because of poor onboarding. And just as retaining customers is less expensive than chasing new business, keeping employees long-term is more cost-effective than continually training new talent.

This is another crucial area of your business where a knowledge management platform can shine.

Instead of a one-week crash course in your company (during which new hires will only retain a fraction of what you share), you can give customer service employees the ability to learn as they go. While this might seem like a strategy that will increase training time, it will actually help you decrease onboarding training time, among many other benefits. 

Not only will they have basic information that sets them up for success (like the answers to commonly asked customer questions), but they’ll also have access to tacit knowledge and subject matter expertise.

The result? Better employee morale, better company reputation, and, yes, better ROI. And showing results in these areas will undoubtedly improve leaders’ confidence in your platform.

Calculate Productivity Savings

Happier, more empowered employees don’t just stay with their employers longer—they’re also more productive and profitable. According to data from Gallup, highly engaged teams drive a 23% increase in profitability.

On the flip side, disengaged employees cost companies as much as $550 billion annually.

A knowledge management platform will help support productivity and ROI by giving your customer service team the tools they need to provide a more efficient, streamlined customer experience. When employees feel prepared, they’ll be able to solve problems and answer questions faster—which means shorter call times and more calls per day.

Understand the Difference Between Hard and Soft ROI

To provide a holistic view of your platform’s value, it’s important you track both hard and soft ROI. We’ll explain the differences below.

Hard ROI

Hard ROI refers to quantifiable benefits that have a specific financial value. For example, you may discover that having a knowledge management platform cuts down on call time, increases the number of daily calls handled per employee by 15%, and saves the company an additional $500,000 annually.

Soft ROI

Soft ROI refers to benefits that aren’t as easily quantified but still offer value. For example, you may find that your knowledge management platform boosts employee morale, which results in better customer experiences.

While most senior leaders want to see hard ROI data, it’s useful to include a few soft ROI points to illustrate the platform’s more holistic value to your organization.

Making a case for investing in a knowledge management platform can seem difficult. But once you’ve learned how to calculate the return on investment by monitoring the right metrics and aligning your results with organizational goals, the value will be crystal clear.


This blog post was originally published in March 2020. It was most recently updated and expanded in November 2022.

November 22, 2022

Harness The Power Of Knowledge Sharing With Digital Transformation

Companies that grasp what the digital workplace is really all about are willing to change the ways people and applications connect across their organizations. By fostering a digitally driven culture of collaboration, they break down silos, share knowledge more effectively and compete more successfully.

Download Now